The first quarter of 2024 proved full of developments and surprises in the realm of international investment law and arbitration. Our editorial board has collected some of the significant highlights for your consideration in this Quarterly Review.
Case Law Updates
At the start of the year, we have learnt that one of the most contentious pending cases was to be no more. On 12 January, the tribunal in RWE AG v. The Netherlands issued an order to discontinue the proceedings after the German Federal Court of Justice ruled the arbitration inadmissible under EU law (the German decision was previously analysed on our blog here).
The first quarter of 2024 also saw several updates in cases against Spain over its renewable energy subsidy reforms. In January 2024, two ICSID tribunals rendered contrasting awards. In the case of E.ON v. Spain, reportedly, the tribunal found that the State breached the ECT’s fair and equitable treatment treaty obligations. E.ON won one of the largest quantum awards rendered against Spain so far. In the second award, in the case of EBL and Tubo Sol v. Spain, the tribunal concluded that the State’s reforms to its renewable energy regime resulted in only a limited breach of the ECT and did not award damages to the claimant. In February 2024, an ad hoc committee rejected the annulment application against the award in JGC v. Spain, upholding Spain’s liability to pay damages to the Japanese investor.
We are also eagerly awaiting the publication of the award in Gabriel Resources v. Romania, due in some two months. Romania has confirmed that it has prevailed in the USD 4.4 billion claim brought by the Canadian investor over the Rosia Montana gold mine.
The first three months of 2024 have also highlighted how busy national courts have recently been with questions relating to international arbitration. In a decision, reported in early 2024, the Svea Court of Appeal, set aside an arbitral award against Poland and under the ECT on the basis of intra-EU objections and Swedish public policy. This was despite the fact that one of the claimants was not an EU national.
On the other hand, in a recently surfaced judgement (I ZB 12/23), the German Federal Court of Justice (Bundesgerichtshof, BGH) rejected India’s claim for non-enforcement of the Deutsche Telekom v. India UNCITRAL award. As reported on our blog, the court clarified the boundaries of EU Law in relation to extra-EU investment treaty arbitrations, holding that such arbitrations do not conflict with EU law and are enforceable in the EU. The decision highlights that extra-EU arbitration agreements, such as the Germany-India BIT, are not constrained by the CJEU’s Achmea and Komstroy rulings.
On 14 March 2024, the Court of Justice of the EU (CJEU) has issues its decision in the case brought by the European Commission against the UK. The CJEU found the UK in breach of EU law (under inter alia Articles 87 and 127 of the Withdrawal Agreement) following the UK Supreme Court’s ruling to move to enforce the intra-EU Micula award in 2020 (during the transition period).
On the other side of the pond, the US Department of Justice recently filed an amicus brief in the Spain Appeals, stemming from a trio of (contradictory) findings by the District Court for the District of Columbia concerning the enforcement of two ICSID and one UNCITRAL intra-EU awards against Spain.
Crucially for the enforcement of any and all arbitral awards, the US observed that: “Becoming a party to either the New York Convention or the ICSID Convention, without more, does not provide the necessary “strong evidence” that a foreign state intended to waive its sovereign immunity in United States courts. [T]he conventions by themselves do not commit a foreign state to engage in arbitration and therefore they could not implicitly waive sovereign immunity for any enforcement action.” Significantly for the intra-EU awards, the US has agreed with the European Commission who have “communicated through diplomatic channels that the district court’s injunctions present serious comity concerns by interfering with the resolution of complex questions of EU law within the EU legal system governing the enforcement of intra-EU arbitral awards.” US’ brief provides that “The district court’s injunctions in NextEra and 9REN were a significant affront to a foreign state in contravention of principles of international comity.”
We are eagerly awaiting the outcome of the case, currently pending in the US Court of Appeals for the District of Columbia Circuit!
The ECT Update
In the previous quarter, we highlighted the on-going ‘meltdown’ of the ECT membership, and this trend has been pursued since then. Indeed, both the UK and Portugal have announced their withdrawal from the ECT. Interestingly, Portugal’s withdrawal means that the remaining contracting parties will have to designate a new depository. Thus far, the ECT Secretariat has officially registered the following withdrawals: France, Germany, Poland, Luxembourg, Slovenia and Portugal. Interestingly, following the unilateral withdrawals of some Member States from the ECT, the EU no longer possesses the majority of votes in the ECT – thus can no longer set the agenda.
On 1 March 2024, the European Commission issued its proposal on the position to be taken on behalf of the EU vis-a-vis the ECT and its modernisation. On 21 March 2024, the meeting of the Joint committee on International Trade and committee on Industry, Research and Energy (INTA/INTRE) took place which highlighted the Commission’s “three-pillar” process for a coordinated withdrawal from the ECT. The proposal is that “the modernisation and the withdrawal of the EU from the ECT move in parallel” under the 3 pillars. Pillar 1 foresees withdrawal of the EU (and Eurotom) from the ECT (to be voted on 9 April). Pillar 2 (proposed on 1 March) dictates that Member States still party to the ECT shall agree to its modernisation. Pillar 3 foresees that there shall be a coordinated withdrawal of Member States post-modernisation of the ECT, unless individual Member States wanting to stay part of the Treaty are granted a special authorisation from the European Commission. During the 21 March Session, the European Commission has also reported on the progress of the inter se agreement between the EU Member States on the inapplicability of the ECT, citing that it is the “next-best thing” after the modernised ECT, and that it would constitute a binding (under public international law) agreement which intra-EU tribunals could not ignore.
Other Developments
Besides the above-mentioned case law developments, the first quarter has seen some interesting developments in rules and agreements.
In November 2023, the Shanghai International Economic and Trade Arbitration Commission announced a new set of rules that came into force on 1 January 2024. The new rules replaced the old SHIAC Arbitration Rules (2015), the SHIAC Arbitration Rules for Aviation, the SHIAC Arbitration Rules for Data and two instruments of SHIAC Guidance for online arbitration and for assisting ad hoc arbitration rules from 2015. New rules are designed to reflect users’ perspectives and are more effective both in domestic laws and international law.
Abu Dhabi Commercial Conciliation and Arbitration Centre (“ADCCAC”) rebranded as the International Arbitration Centre (ArbitrateAD). The new centre published the arbitration rules effective on 1 February 2024. The new rules differ from the former rules in several points: Digital Communications and Electronically Signatures, Emergency Arbitrators, Expedited Procedure, Seat and Language, Joinder and Consolidation, Third Party Funding, Early Dismissal, Broad Tribunal Powers, Confidentiality, Award Scrutiny, Award Publication and Content, Express Waiver of Appeal Rights.
Finally, despite the ongoing progress on the CETA (including the agreement of the CETA parties on the interpretation of investment provisions under CETA from 9 February 2024), the future of the Agreement is now under question following the vote in the French Senate rejecting the trade agreement (by 255 votes to 211). The Senate, voting on 21 March 2024, took the biggest issue not with the investment aspects of the CETA but rather with its trade dimension.
EFILA Blog
With a busy start to the year, we have been glad to share several thought provoking pieces on our blog.
Paul Uranga explored the evolution of international investment arbitration in “A Metamorphosis of Mindset: How International Investment Arbitration Has Evolved Without Major Institutional Reform”. Uranga draws parallels with Kafka’s “The Metamorphosis” to describe how arbitration transformed, through a shift in arbitrators’ mindsets rather than a formal systemic overhaul. Despite criticisms and calls for reform, arbitrators have increasingly considered States’ perspectives, leading to a gradual shift in investment disputes.
Agata Daszko explored the German Federal Court of Justice’s decision on the enforcement of Deutsche Telekom v. India award in “Germany’s Highest Civil Court Reinforces the Distinction Between Intra-EU and Extra-EU Arbitration”. The court clarified the compatibility of extra-EU investment treaty arbitrations with EU law, distinguishing them from intra-EU disputes.
Ioana Maria Bratu discussed the English High Court’s stance on state immunity in enforcement proceedings in “The Future of Enforcement in the UK: English Court provides a novel attitude to State immunity in Border Timbers v Republic of Zimbabwe”. The High Court dismissed Zimbabwe’s immunity claim and allowed enforcement of a USD 125m ICSID award against it. However, the court’s approach in doing so, contrasted with previous judgments. This approach introduces some uncertainty in future UK enforcement actions.
Jiawen Wang reviewed the European Commission’s introduction of model clauses for future EU bilateral investment treaty negotiations in his piece “The European Commission’s Model Clauses: Highlighting Human Resource Sustainability for EU Investment Treaties”. Despite not being binding, these model clauses represent the EU’s commitment to sustainable investment, challenging traditional economic priorities and potentially influencing future European investment treaties.
Finally, we are very grateful to Mian Sami ud-Din who sat down with us for a chat as part of the “Young EFILA in Conversation With…” interview series. You can read the piece here.
Events
Since the last quarter, we have arrived at one of the most stimulating parts of the year of the international arbitration circle.
The Paris Arbitration Week was held between 18 and 22 March 2024. On the first day of the PAW, EFILA and ESSEC Business School event on “Human Rights, ESG and Civil Society in Investment Arbitration” could be followed between 15.00-18.00. The event was a big success, attracting much insightful discussion and great exchange of views.
We are, of course, very excited for the 9th EFILA Annual Conference! The event will take place on 25 April 2024 in Frankfurt. The general topic will be “New Frontiers in International Investment Arbitration”. The Conference is hosted by the Clifford & Chance Frankfurt office, the registration is still open. We hope to see you there!
***This quarterly review was prepared by Anastasia Choromidou, Agata Daszko, and Özge Varis***